Marketing Planning
Segmentation, targeting, positioning, niche vs mass markets, USP, and differentiation.
- Explain the purpose and components of a marketing plan
- Define segmentation and identify its main bases
- Distinguish between targeting and positioning, and explain how they connect
- Compare niche and mass markets
- Distinguish between a USP and differentiation
- Explain Porter's three generic competitive strategies
The Role of Marketing Planning
A marketing plan brings together all the decisions a business makes about how to reach and serve its customers. It sits within the broader business planning cycle — marketing objectives must align with overall business objectives.
A marketing plan typically contains:
- Marketing objective — e.g. increase market share, enter a new segment. Must align with business objectives.
- Marketing budget — objective-based, sales-based, or incremental
- Segmentation and target market — which customer groups to focus on
- Market research — understanding needs, tastes, habits, preferences of the target market
- Marketing strategies — the 4Ps or 7Ps: what the business will actually do
- Control tools — how success will be measured (sales data, repeat customers, surveys)
Segmentation
Market segmentation is the process of dividing a market into distinct groups of consumers who share similar characteristics, needs, or behaviours.
Main bases of segmentation
| Basis | Variables | Example |
|---|---|---|
| Geographic | Region, country, urban/rural, climate | Selling winter clothing only in colder regions |
| Demographic | Age, gender, income, occupation, education, family status | Luxury watches marketed to high-income professionals |
| Psychographic | Lifestyle, interests, values, attitudes, personality | Eco-friendly products for sustainability-conscious consumers |
Why businesses segment markets
- Identify gaps and opportunities in the market
- Design products that better meet specific customer needs
- Reduce wasted marketing resources by targeting only relevant consumers
- Spread risk by serving multiple different segments
- Ultimately, increase sales and profitability
Targeting
Targeting is the process of selecting which market segment(s) a business will focus its marketing efforts on.
Once segments are identified, a business evaluates them and decides which to pursue based on:
- Size and growth potential of the segment
- How well the business can serve that segment
- Level of competition within the segment
- Fit with the business's resources and objectives
Positioning and Position Maps
Positioning is how a business wants its product to be perceived by its target market relative to competitors.
A position map (perceptual map) is a visual tool that plots products or brands along two axes (e.g. price vs quality, premium vs budget, traditional vs modern). It helps identify:
- Where competitors are clustered
- Gaps in the market
- Where a new product could be positioned
The process: Identify competitive advantages → Decide which strengths to market → Focus on your market segment.
Niche Market vs Mass Market
- A small, specialised segment of a larger market
- Products tailored to specific customer needs
- Less competition, but smaller potential sales volume
- Often supports premium pricing
- Higher risk if the niche disappears or is entered by a large competitor
- Products aimed at the broadest possible audience
- Large sales volumes; rely on economies of scale
- More competition; harder to differentiate
- Often lower profit margins per unit
- Greater brand recognition potential
Unique Selling Point (USP)
A USP is the main reason a customer chooses one product or brand over competitors — a specific feature, benefit, or idea that stands out to the target market.
A USP must:
- Add clear value to the customer
- Be perceived as different from or better than rivals
- Be difficult for competitors to copy
A business can have more than one USP, but marketing typically focuses on the most compelling one for the target segment.
Differentiation
Differentiation is the strategy or process of making a product or business distinct from competitors in ways that are valued by the target market.
USP vs Differentiation:
- Differentiation = the strategy/process — "highlighting differences across the board"
- USP = the specific feature — "the precise element that marks the brand out"
Differentiation focuses on creating perceived value for the target market, reducing direct competition, and influencing customer choice. A business can differentiate in more than one way simultaneously.
Porter's Three Generic Competitive Strategies
| Strategy | Description |
|---|---|
| Cost Leadership | Become the lowest-cost producer in the industry, allowing competitive pricing or higher margins |
| Differentiation | Produce distinct products that stand out from competitors — a strong USP gives competitive advantage |
| Focus | Concentrate on a particular market segment, such as a niche or a specific geographic area |
Key Terms
- STP = Segmentation → Targeting → Positioning: each stage informs the next
- Three bases of segmentation: geographic, demographic, psychographic
- Niche markets offer less competition and premium pricing but smaller volume and higher risk
- USP = a specific distinguishing feature; differentiation = the overall strategy
- Porter's three generic strategies: cost leadership, differentiation, focus
Uni-structural (AO1): What is the STP model, and what is the specific purpose of each of its three stages?
Answer: STP stands for Segmentation, Targeting, and Positioning. Segmentation divides the market into groups with shared characteristics. Targeting selects which segment(s) to focus on. Positioning determines how the product should be perceived by the target market relative to competitors.
Multi-structural (AO2): Identify the three main categories of market segmentation and list the variables used in each.
Answer: Geographic (region, country, urban/rural, climate); Demographic (age, gender, income, occupation, education, family status); Psychographic (lifestyle, interests, values, attitudes, personality).
Relational (AO3): Analyse the relationship between market segmentation and the creation of a USP: how does a clear understanding of a specific subgroup allow a business to differentiate its product effectively?
Model approach: Start with the segmentation insight (e.g. "urban professionals aged 25–40 value convenience and status"). Show how this informs the USP (e.g. "fastest delivery in the city" or "the premium material that professionals trust"). Explain how this differentiation creates perceived value that makes it hard for competitors to copy without changing their own positioning.
In an essay question about STP, don't just define the three stages — show how they connect. A strong answer demonstrates that segmentation informs targeting, and targeting informs positioning. The best answers apply this chain to a specific business from the stimulus material.
Choose one of the following products: water, smartphones, coffee/cafés, sports shoes, streaming services, bags, public transport.
- Identify at least three different groups of people who might use or buy this product in different ways.
- For each group, describe who they are (key characteristics) and explain what they would expect or want from the product.
- Develop two detailed customer profiles using geographic, demographic, and psychographic categories. Include: age range, income level, gender, occupation, marital status, location, and values.
Choose a market you know well (e.g. coffee shops, smartphones, trainers).
- Choose two relevant axes for a position map (e.g. Price: Low–High; Quality: Low–High).
- Plot at least five brands or products on the map.
- Identify any gaps in the market. Are these genuine opportunities or are they gaps for a reason?
- Where would you position a new entrant to this market? Justify your choice.
For each of the following, identify their USP and explain why customers choose them over alternatives. Then assess: is the USP easy or hard for competitors to copy? What does this mean for the business's long-term position?
- Tesla (electric vehicles)
- Dyson (vacuum cleaners)
- IKEA (furniture)
- A local business you know personally
HydroGlow (HG) is a mid-sized company specialising in sustainable skincare. For years, HG operated in the mass market, competing with global giants by offering eco-friendly moisturisers. Facing intense competition, HG is now pivoting to a niche market: specialised anti-pollution skincare for urban professionals.
- Using the concept of segmentation, explain how HG might identify and describe its new target segment.
- What would HG's new USP need to be to succeed in this niche?
- Draw a position map for the skincare market and plot where HG currently sits and where it wants to move.
- Evaluate whether moving from a mass market to a niche market is a sound strategy for HydroGlow. Consider at least two advantages and two risks.
- What makes a gap in the market a genuine opportunity vs a warning sign?
- Think of a business that successfully filled a gap. What made it work?
- Think of a business that tried to fill a gap and failed. What went wrong?